Shifting global demographics: An African opportunity? (6)

Surplus absorption and development

Surpluses chasing deficits underpin global trade. “Over the past several decades, demand for goods and services has therefore become the world’s scarcest and most valuable resource, with the United States playing the role of swing producer.” Slavery, immoral though it was, could be seen as surplus labour in Africa filling labour deficits in the West. Colonialism was also the primary channel through which the United Kingdom funnelled its production surplus abroad to earn funds to meet its input deficits (Klein & Pettis, 2020).

From this perspective, the post-World War Two Marshall Plan was in effect, a mechanism by the United States that created demand for its own goods by lending a war-devastated Europe the cash that enabled them to buy American goods. In fact, “The Marshall Plan eventually provided $13 billion of aid between 1948 and 1952, around 5 percent of US GDP (Coggan, 2020).”

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The exposition above shows how Africa has always acted as a surplus absorber for the rich world. The difference this time around is that it does not need to be forced to do so. This model also illuminates China’s Belt and Road Initiative (BRI) role as a surplus absorption scheme. While not originally motivated by Africa’s so-called “demographic exceptionalism”, it probably should have. The BRI should primarily focus on what is increasingly seen as the “African century”. This is not farfetched.

Africa could become a huge export market for high technology from the developed world. But apart from China, there is little awareness of this thesis

In his 2020 book China and the future of globalisation: The political economy of China’s rise, Grzegorz Kolodko asserts that motivations for China’s Belt and Road Initiative and its investments in Africa anticipate the continent’s future wealth. “Just think that even if, halfway into the century, only a tenth of Africa’s population is wealthy, let’s say with incomes at the level of today’s US middle class, this will represent for China a bigger market than Europe, with its middle class (Kolodko, 2020).”

China’s demographics are evolving. Its aged are increasing, and its birth rates are low. These factors lead China to being only nine per cent of the world’s population by 2100, down from 14 per cent today. China is leading the efforts to digitalise its manufacturing and services (Kolodko, 2020). While China evolved quickly enough to avoid the initial impacts of automation and robotisation, these are now in full play. Africa may not be able to industrialise before China offsets its inevitable labour constraints with robots. As China would need a market for what will almost surely be excess production, its investments in the continent’s infrastructure and capacity ahead of a future when these scarce resources will likely be in demand make sense.

Africa could become a huge export market for high technology from the developed world. But apart from China, there is little awareness of this thesis. China seems to be the only industrialised country with a comprehensive strategy that acknowledges Africa’s demand potential and leverages that as the basis for its engagement with the continent. That may be about to change.

American thinkers and policymakers are beginning to catch on. In a recent policy brief, leading American think-tank Centre for Strategic & International Studies acknowledges “U.S. policy toward Africa is in need of a facelift – in both substance and strategic vision – to keep up with the continent’s shifting demographics and growing influence on the world stage.” Africa’s unique demographics underpin this rethink.

It is a bit surprising that it took China’s competitive stance on the continent to motivate this realisation; especially as one would think that an America that was forward-thinking and visionary in its Marshall Plan surplus absorption scheme for Europe would have been first out the gate on the African front. Still, it supports the thesis of this article. Shifting global demographics tilts likely scarce future demand towards Africa. To make this a reality, however, global firms need a “Marshall Plan type” business strategy for the continent.

Canning, Raja, & Yazbeck (2015) observe “the sectors needed to encourage the demographic transition and produce a dividend include health, education, population, business development and investment, domestic savings and trade.” Better health infrastructure will help reduce child mortality. Female contraceptives may empower women to make self-interested fertility decisions. Secondary school education is found to raise the marriage age for girls and delay childbirth. It also raises employment prospects for both genders. Adding greater financial inclusion that rewards saving and provides income-enhancing credit results in a virtuous cycle.

Edited & published by the NTU-SBF Centre for African Studies at Nanyang Business School, Singapore. References, figures, tables, etc. in original article viz. https://nbs.ntu.edu.sg/Research/ResearchCentres/CAS/Publications/Documents/NTU-SBF%20CAS%20ACI%20Vol.%202020-32.pdf